Credit Suisse is buying HSBC's private banking business in Japan, raising its profile in the world's third-largest economy where it began onshore private banking just two years ago.
HSBC, Europe's biggest bank, said the value of the gross assets of the business being sold was $2.7 billion (1.7 billion pounds) as of end-October, but it did not disclose the sale price.
It said the sale is part of a strategy outlined in May. CEO Stuart Gulliver wants to cut annual costs by $3.5 billion and sharpen the bank's focus on Asia by quitting countries or businesses where it lacks scale.
Asia is a battleground for global and local private banks competing for market share in a region that is fast outpacing the United States and Europe in economic growth.
Powered by China and India, Asia-Pacific's millionaire ranks rose 10 percent to 3.3 million last year, second only to the 3.4 million in North America and inching ahead of Europe's 3.1 million, according to a Merrill Lynch/Capgemini Asia-Pacific wealth report.
Asia's combined wealth rose 12 percent to $10.8 trillion last year to overtake Europe and is closing in on the United States and Canada, where wealth rose 9 percent to $11.6 trillion. More than half the world's millionaires are still to be found in the United States, Japan and Germany.
Asia's private banking industry has seen consolidation recently as the market turmoil dampens growth, and rising regulatory and staffing costs dent profitability.
Swiss private bank Julius Baer said in October it was buying the Asian private wealth portfolio of Australia's top investment bank Macquarie Group.
Credit Suisse said it plans to expand client coverage through integrating new offices in Nagoya and Osaka in western Japan and aims to boost profitability. Currently the Swiss bank has an office in Tokyo.
This acquisition will strengthen Credit Suisse's private banking capabilities and reinforces its long-standing commitment to offering leading wealth management services in the Japanese market, the Swiss bank said in a separate statement.
The acquisition, which needs regulatory approval, is expected to close in mid-2012.
HSBC will sell its top-tier Japanese private banking business, which covers clients who hold more than 200 million yen ($2.57 million) in financial assets, said an official at HSBC Japan, who spoke on condition of anonymity.
But it will retain HSBC Premier, the private banking service that covers clients who hold more than 10 million yen in assets, the official said, declining to provide details on the number of staff involved in the bank's top-tier private bank section.
Credit Suisse has targeted Japanese investors who hold more than 1 billion yen in assets.
Japan has 1.7 million millionaires in dollar terms, and is by far the single largest market for high net worth individuals in the Asia-Pacific region, accounting for 52.5 percent of the region's millionaires and 38.2 percent of its wealth at end-2010, according to the wealth report.
Japanese millionaires had assets of about $4.135 trillion at the end of 2010, the report said.
Junya Tani, head of private banking for Credit Suisse in Japan, said the deal showed the bank's commitment to build a leading private banking business in Japan, acquire assets and drive profitability.
Since we began our onshore private banking business in 2009, the progress we have made has exceeded expectations and we are looking forward to building on this success with this acquisition.
Credit Suisse's rival UBS has also been strengthening its business in Japan and Asia-Pacific. Still, the Japanese private banking industry is dominated by local banks, analysts said.
Credit Suisse said its private banking business in the Asia-Pacific region has been among the fastest-growing of its international wealth management businesses, with annual double-digit growth in net new assets.
HSBC last month reported a 36 percent fall in third-quarter profits as the euro zone debt crisis hit investment bank income, while strains in the U.S. economy saw bad debts there jump by almost $1 billion, the first rise in two years.
Shares in HSBC opened more than 2.7 percent higher in Hong Kong on Wednesday.
($1 = 77.7400 Japanese yen)
(Additional reporting by Chikafumi Hodo in Tokyo, Editing by Ian Geoghegan)